Alan Caruba's blog is a daily look at events, personalities, and issues from an independent point of view. Copyright, Alan Caruba, 2015. With attribution, posts may be shared. A permission request is welcome. Email acaruba@aol.com.

Monday, September 5, 2011

"Grand Theft Auto" - How Auto Dealers Fought Back and Won

By Alan Caruba

We are all aware that one of the bail-outs that occurred on Obama’s watch was the takeover of two of the three major auto manufacturers, General Motors and Chrysler companies. As both faced bankruptcy, the Obama administration stepped in to become the owner of these companies.

Among the first to discover the arrogance and ignorance of those selected to direct its Automotive Task Force were hundreds of dealerships for both companies. On May 14, 2009, Alan Spitzer was among them. He was informed that his company, begun by his grandfather, expanded by his father, and one he expected to hand on to his own children had been arbitrarily disenfranchised by Chrysler.

The worst aspect of this was that, while franchises are protected by state law, federal law trumps this long established business relationship. Chrysler had been instructed to divest itself of a quarter of its dealer network and General Motors was as well. Some 2,000 dealerships were affected by the regimes demands.

As Spitzer and his daughter, Alison, spell out in their new book, “Grand Theft Auto: How Entrepreneurs Fought for the American Dream” (http://www.newyearpublishing.com/), “Dealers are completely independent business people, not owned by the auto manufacturers as many believe. Dealers are the manufacturer’s only customers. They are the face of their brands. Without them there are no sales.”

One might have thought that the last thing to do would be to decimate a quarter of General Motors and Chrysler’s vast network of dealers, but that is exactly what the Obama task force did “as a condition for securing the federal funding they needed to stay afloat.” While “saving” the companies essentially was a sop to the auto unions, the task force cut loose the dealers who were the lifeblood of the companies, plunging many of them into economic destruction along with their thousands of employees.

Worse yet, “hundreds of franchises were stolen from their rightful owners and re-assigned or ‘gifted’ to other dealers.” Additionally, anyone who owned GM’s and Chrysler’s securities were informed that neither company would honor them under their new management, defrauding them of their investment. Both companies were required to add union representatives to their board of directors.

They had to have been extraordinarily stupid to do this, but the task force did not include a single person with any experience in the auto industry. If they had they would have known that “States earn about 20 percent of their sales tax revenue from auto dealers.” What’s more, “dealerships comprise as much as 7-8 percent of all retail employment.”

Critical to this extraordinarily thuggish decision was the fact that the dealerships did not cost the auto manufacturers one dime. They were given less than a month to close their doors. Contrary to the belief that the decision of who would be closed was not based on their political affiliations. Indeed, there appeared to be no rational reason for who was chosen for destruction.

The takeover was an example of a gangster government intervening in the private sector; making sure to not “let a crisis” go to waste as it pursued its socialist agenda.

For Alan Spitzer, it was apparent that “the only avenue for justice would be for Congress to enact another federal law that, presumably, would leapfrog the bankruptcy statues and overturn the terminations. In my view, these actions represented a threat, not just to the nation’s 18,000 car dealers, but to our entire franchise system that is so fundamental to the way business is conducted in America.”

The most astonishing aspect to Spitzer’s story is that he literally created a grassroots movement to overturn the government’s illegal and outrageous terminations and that he got a bill passed through a bitterly partisan House and Senate!

The grassroots effort “was directly responsible for saving hundreds of dealerships and tens of thousands of jobs,” said Spitzer. In the end, after Obama signed the legislation that was part of a larger bill, Spitzer actually got to meet the President who still did not give any evidence of understanding what his administration had attempted to do.

The GM and Chrysler takeover was just one more example of how ruthless, ignorant, and incompetent the Obama regime has proven to be with its reckless spending and idiotic “cash for clunkers” programs that achieved nothing more than to get the nation’s historic AAA credit rating reduced and lines around employment fairs that stretch to the horizon.

Gangster Governments, indeed, Alan. The only thing you need to add is "Chicago Gangster Governments".This is a classic example of the methodology utilized by the elite Keynesian economists who consider themselves and their pet theories above fact and common sense. Check out http://mises.org/ for a great place to learn about economics from the beginning (to what I'm afraid might be the end).

@TexasFred: As the commentary notes, it was the idiots on his Auto Task Force that took that action for no rational reason. This was never really a union issue except that the bailout of GM and Chrysler was meant to save the companies FOR the unions. They both went into and out of bankruptcy proceedings ANYWAY!

At the time this monstrosity was perpetrated, I remember a story that linked Dem party donors to the dealerships that were saved (and given some of the closed franchises), while Repub donors were the dealerships that were closed, no matter how many cars they were selling. Anyone remember such a story?

About Me

I am and have been for a long time a writer by profession. I have several books to my credit and my daily column, "Warning Signs", is disseminated on many Internet news and opinion websites, as well as blogs. In addition, I am a longtime book reviewer and have a blog offering a monthly report on new fiction and non-fiction.